Consumer Purpose Loan?

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    James White

    If we have a loan to purchase a primary dwelling with two borrowers – one borrower is a natural person (to whom the primary dwelling belongs) and the other borrower is a business, would this loan still be considered consumer under Reg Z? Does the fact that one borrower is not a natural person make Reg Z not applicable in these cases?


    1026.3 3(a) is the section in TILA that speaks to exemptions. Under this section Primary purpose is the factor when considering if the disclosures are needed.

    Primary purposes – A creditor must determine in each case if the transaction is primarily for an exempt purpose. If some question exists as to the primary purpose for a credit extension, the creditor is, of course, free to make the disclosures, and the fact that disclosures are made under such circumstances is not controlling on the question of whether the transaction was exempt.

    The whole purpose is to protect the consumer. So, the fact that you have a business and a Natural person as borrowers will not determine if you must follow the TILA rules. You will need to determine what the purpose of the loan is.

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